Does Capitalism Really Create Inequality?

posted by Ali Al-Wardi | 26pt
September 21, 2016

Dear Prof. Wolff, Some economists, writing in the press, have claimed that criticisms of capitalism are overblown and that, contrary to what is believed, inequality and indeed poverty are declining, thanks -they say- to capitalism. See for example the following article by the German economist Clemens Fuest who cites World Bank figures that suggest global income inequality is declining and that the rate of people living below a dollar a day has also declined quite significantly: http://www.zew.de/en/das-zew/aktuelles/clemens-fuest-zehn-thesen-zur-ungleichheitsdebatte/ I note that Prof. Fuest directly challenges the Oxfam figures you have so frequently referred to in recent episodes of Economic Update. Who is right? I am grateful for your excellent work and hopeful that you can respond to this question. Sincerely

Official response from Richard Wolffsubmitted

Dear Ali Al-Wardi,

The overwhelming concensus of economists, from divergent ideological standpoints, is that inside most countries, inequality has worsened over the last 50 years. The rise of China as a world economic power and its stunning rapid industrialization have raised the income levels of average Chinese dramatcally so that aggregate world comparisons can yield a drop in inequality among countries even as inequality worsens within countries (including and notably China). Its not a question of believing what you read; it is more a question of understanding what the point is the economist wishes to make and what data are being used to suppport the point. Periodically, people rise up against capitalism and its deepening inequality and can temporarily slow or even reverse it. The New Deal did that in the US between 1935 and 1975. But eventually, capitalism reasserts its drive toward greater inequality (for all the reasons presented in Thomas Piketty's book Capital in the 21st Century.

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Thank you for this great answer to my question. What you say makes perfect sense and clarifies the matter. I really appreciate that you took the time and effort to answer this question. Thanks! Sincerely – Ali

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Richard D. Wolff is Professor of Economics Emeritus at UMass Amherst and a visiting Professor in the Graduate Program in International Affairs of the New School University in New York. Richard Wolff is also a co-founder and active contributor of his non-profit: Democracy at Work